Here is where you can see the real fight for the future of business computer accounting and management.

The Xero vs Intuit vs NetSuite stock price change chart below shows that Xero wins big. Xero is up about 16 times as much as Intuit. Xero also is up about five times as much as NetSuite. Oracle billionaire Larry Ellison has been backing NetSuite from the beginning. Ellison had the money to buy the America’s Cup vs New Zealand, but New Zealand’s Xero should keep beating NetSuite badly in growth.

I am now reading and very much enjoying the The Big Switch:

The Big Switch actually further confirmed my faith in Xero and my conviction that Intuit is killing itself and its users. The book traces how electricity went from being a laboratory marvel, into a novelty for the rich and then into a very reliable, cheap and responsive utility for us all. It also shows how this completely transformed our lives. However, it does this is to show us exactly how this pattern is precisely repeating, in even faster and more distruptive ways, first with computers and now with the web.

The web is no longer simply a place where you can browse anywhere and use any programs that you wish (or can afford, with costs dropping fast). It is where individuals, businesses, non-profits and government increasingly can and do run programs and store data, in the most cost effective, reliable and creative ways. It also shows that what is possible is changing incredibly fast.

The CERN supercollider and Berkley NASA SETI projects (search for extraterrestrial intelligence) use the web to process far more data than they could afford. Both distribute programs and parts of their data to anyone who volunteers to process it. You need not be a computer genius, as simple programs download data and process it only when computers are not busy. In the case of CERN, this is taking the place of an estimated 100,000 dedicated computers. In the case of SETI, there are more than three million volunteers. The number of SETI volunteers should rise quickly once the new Android app goes live. Dick Tracy’s computer watch was nothing like this.

Here is how The Big Switch shows us that Xero is on the right track and Intuit is still going down a wrong track fast. Xero uses many redundant Rackspace computers, at many highly secure and geographically disbursed locations, with continuous backup. Redundant computers have built-in auto-switching spare parts. However, it does not matter if computers occasionally fail completely, as software automatically switches to other computers.

Rackspace has an outstanding reputaion for reliability and security. That is why it was no surprise to see Xero availablility of more than 99.99% since its 2007 launch. Rackspace also lets Xero almost instantly add or subtract computer power and storage, based on user needs. Changes can happen automatically with high (or low) CPU use, how long it takes to process entries or with day, night or weekend schedules. This lets Xero deliver superlative service at minimum cost. This is exactly the type of approach that excited The Big Switch author. It is also what excited me, so this non-data-processing professional CPA used it to save $1,000+ a month, for faster and more reliable processing.

Contrast this with the sad example of Intuit. A few years ago it had one main computer center. It then had many major outages. ONE lasted for about five days. After repeated CEO apologizies, Intuit began building major new centers.

WRONG! WRONG! WRONG!

Good computer professionals usually advise buying computers to process a five-year expected maximum load. An old IBM story says:

Estimate jobs with quotes from three committees.

Take the HIGHEST estimate!

Double it!

Double it again!

Intuit probably made even bigger mistakes. Its prior systems were too unreliable, so it must have made absolutely sure its new systems would be much bigger, more reliable AND EXPENSIVE than needed on day one. However, even if the new system was almost the right size on day one, such static sysems are like stopped clocks, which are sure to be right only twice a day. In this case, the systems had little chance of being the right size, except near the end of a five year period, if the growth estimates were very good. There also was no chance that Intuit could change sizes quickly, much less in a cost effecttive way.

It then got far worse. Intuit probably did not expect:

QuickBooks desktop losing 17% of users

QuickBooks Online adding only 75% of these users

QuickBooks losing 70% of add-ons links in 21 months

A drop in TurboTax online filings

Website, real estate, financial & medical business sales

A $1.350 billion Digital Insight asset doing badly

Losing $320 million on Digital’s sale (a Big Switch favorite)

A 2013 loss to cut net July 2012 capital to $2.424 billion

Insiders sold $4 billion in Intuit stock in four years

Insiders only bought option stock, which they sold quickly

Stock buybacks cost more than cumulative earnings

Use Digital Insight proceeds for $2.43 billion more buybacks

$2.43 billion is more than July 2012 adjusted capital

$2.43 billion is four times July 2013 after tax income

This means the new Intuit computer centers are probably vastly more expensive than what Intuit now needs or will need, because no one read The Big Switch.